Average growth of IFAs will be 4% in 2013 according to a new report, but companies should be careful to retain profitability as they expand, an analyst said.
The research, conducted by analyst company Plimsoll Publishing, questioned 1,000 IFAs, and found that average growth in the sector was likely to be 4%.
However, this growth was being driven by just one quarter of the IFA community - some 294 elite companies - who were likely to expand by an average of 30% this year.
Smaller companies were likely to reduce in size by 4%.
Chief analyst at Plimsoll, David Pattison, said that the growth gave "reason for cheer" but that these elite IFAs were growing at the expense of profitability.
He said: "The key is to get growth and maintain the margin. Average margins across these growing companies are low at just 3.1% - well below the industry average of 9.1%."
He added: "It's also significant that it's the largest companies that are increasing in sales the fastest.
"Typically, larger companies are seeing sales increases of almost 7% and this is clear evidence that the industry is consolidating more and more towards the dominance of the major players.
"For smaller companies in the market this is the third consecutive year for their sales to decline."
The report also found that the IFA market was likely to be one of the more buoyant in the financial sector with insurance brokers at 3.2%, solicitors at 3.1% and motor vehicle finance at -0.6%.
Clarke replacing Balkham
'Deep-dive analysis of client behaviour'
Ways to mitigate April’s increases
The best equity income funds examined